Shalivahana Estates Private Limited, (Formerly known as Shalivahana Estates), Hyderabad V. ACIT., Circle-10(1), Hyderabad, Hyderabad

ITA 1868/HYD/2014

• Counselvise Citation: 186822514 RSA 2014
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y SESHA SRINIVAS
• Assessee Lawyers: S RAMA RAO
• Keywords: Source of fund
• Section: 143(3); 147; 148; 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.1868 & 1869/HYD/2014 ASSESSMENT YEAR 2009-2010 & 2010-2011 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABAD. PANAAQFS1547L VS. ACIT, CIRCLE 10(1) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. S. RAMA RAO FOR REVENUE : MR. Y. SESHA SRINIVAS DATE OF HEARING : 16 .0 9 .2015 DATE OF PRONOUNCEMENT : 27 . 11 .2015 ORDER PER SMT. P. MADHAVI DEVI, J.M. BOTH ARE ASSESSEES APPEALS FOR THE A.Y. 2009- 2010 AND 2010-2011 RESPECTIVELY. IN BOTH THESE APPE ALS, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LD. C IT(A) IN CONFIRMING THE ACTION OF THE A.O. IN HOLDING THAT T HE AMOUNT OF RS.3 CRORES PAID BY THE ASSESSEE TO ITS S ISTER CONCERN SALIVAHANA ASSOCIATES, IS NOT FOR THE PURPO SE OF ACQUISITION OF PROPERTY AND IN DISALLOWING THE CLAI M OF INTEREST OF RS.10,05,932 THEREON UNDER SECTION 24(B ) OF THE I.T. ACT. 2 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM, THE OWNER OF A PROPERTY AT SAROJINI DEVI ROAD , SECUNDERABAD, ENTERED INTO A DEVELOPMENT AGREEMENT WITH ONE OF ITS SISTER CONCERN M/S. SHALIVAHANA ASS OCIATES (REFERRED TO AS DEVELOPER HEREINAFTER) FOR CONSTR UCTION OF A COMMERCIAL COMPLEX ON THE SAID LAND WITH THEIR OW N FUNDS VIDE DEVELOPMENT AGREEMENT DATED 01.04.2001. THE SAID COMPLEX WAS COMPLETED IN 2004 AND THEREAFTER T HE ASSESSEE ENTERED INTO REGISTERED LEASE DEEDS DATED 04.05.2005 WITH M/S. SECUNDERABAD HOTELS P. LTD., F OR LEASE OF THE ABOVE MENTIONED CONSTRUCTED PROPERTY. THEREAFTER, THE ASSESSEE OBTAINED A LOAN ON LEASE R ENTALS FROM UCO BANK TO REPAY A LOAN OBTAINED BY THE DEVEL OPER M/S. SHALIVAHANA ASSOCIATES FROM ORIENTAL BANK OF COMMERCE. ASSESSEE CLAIMED THE INTEREST PAID TO UCO BANK FROM THE INCOME FROM HOUSE PROPERTY AS INTER EST PAID FOR ACQUISITION OR IMPROVEMENT OF THE PROPERTY UNDER SECTION 24(B) OF THE ACT FOR THE FIRST TIME DURING A.Y. 2005- 06. DURING THE SCRUTINY PROCEEDINGS UNDER SECTION 143(3) OF THE ACT FOR THE A.Y. 2005-06, THE A.O. CALLED FO R THE DETAILS OF THE LOAN ADVANCED TO THE SISTER CONCERN AND AFTER CONSIDERING THE DETAILS FILED BY THE ASSESSEE , ALLOWED THE CLAIM OF THE ASSESSEE. SIMILAR CLAIMS MADE IN A .YS. 2006-07 AND 2007-08 WERE ALLOWED BY THE RESPECTIVE ASSESSING OFFICERS. THEREAFTER, THE CIT EXERCISING JURISDICTION UNDER SECTION 263 SOUGHT TO REVISE THE ASSESSMENT ORDERS FOR A.YS. 2006-07 AND 2007-08 ON THE GROUND THAT THE ASSESSEE HAS OBTAINED LOANS FROM UC O BANK AGAINST LEASE RENTALS AND NOT FOR CONSTRUCTION OR 3 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. IMPROVEMENT OF THE PROPERTY AND THEREFORE, THE INTE REST ON SUCH LOAN WAS NOT ALLOWABLE UNDER SECTION 24(B) OF THE ACT. BEFORE THE CIT, THE ASSESSEE SUBMITTED THAT IN THE ORIGINAL DEVELOPMENT AGREEMENT DATED 01.04.2001 THE SHARING RATIO OF THE DEVELOPER AND THE ASSESSEE WAS 65:35 RESPECTIVELY (OF THE BARE STRUCTURE) AND THAT IN AD DITION TO THE ABOVE, THE DEVELOPER HAD AGREED TO PAY AN INTER EST FREE NON-REFUNDABLE DEPOSIT OF RS.80 LAKHS TO THE OWNER AND THAT THE DEVELOPER FAILED TO PAY THE NON-REFUNDABLE DEPOSIT AND IN LIEU OF THAT, THE DEVELOPER HAS AGRE ED TO ENHANCE THE SHARING RATIO TO 50:50 AND THE SUPPLEMENTARY AGREEMENT DATED 19.12.2002 WAS ACCORDINGLY ENTERED INTO. IT WAS FURTHER SUBMITTED THAT AS THE WORK WAS IN PROGRESS, THE ASSESSEE WANTED TO SE LL THEIR SHARE OF THE AREA WITH FURNISHINGS AND REQUES TED THE BUILDER TO COMPLETE ALL FINISHING AND THAT BOTH THE PARTIES MUTUALLY AGREED FOR SUCH WORKS TO BE COMPLETED @ RS .300 PER SQ. FEET WHICH WORKED OUT TO ABOUT RS.330 LAKHS TOWARDS ASSESSEES SHARE AND THAT AS THERE WAS A SL UMP IN THE REAL ESTATE MARKET AT THAT TIME, THE ASSESSE E AND THE DEVELOPER AGREED TO LET OUT THE PROPERTY TO A S UITABLE TENANT AND M/S. SECUNDERABAD HOTELS P. LTD., CAME FORWARD TO TAKE THE ENTIRE AREA ON LEASE FOR A PERI OD OF 10 YEARS. IT WAS SUBMITTED THAT AS AGREED, THE DEVELOP ER COMPLETED THE WORK BEFORE 31.12.2004 AND THE AREA W AS LET OUT FROM 01.01.2005 ONWARDS AND AS THE ASSESSEE HAD TO PAY THE AMOUNT OF RS.330 LAKHS TO THE DEVELOPER, IT HAD AVAILED A LOAN OF RS.300 LAKHS FROM M/S. UCO BANK AGAINST THE FUTURE RENTS IN THE FINANCIAL YEAR RELE VANT TO 4 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. A.Y. 2005-06 AND THE INTEREST THEREON WAS CLAIMED U NDER SECTION 24(B) WHICH WAS DULY CONSIDERED BY THE A.O. BEFORE ALLOWING THE CLAIM OF THE ASSESSEE. IT WAS S UBMITTED THAT THE LOAN WAS AVAILED FOR IMPROVEMENT OF THE AS SET AND THEREFORE, THE INTEREST WAS ALLOWABLE UNDER SEC TION 24(B) AND AS IT WAS ONLY A BROUGHT FORWARD LOAN FRO M EARLIER YEARS WHICH WAS ALLOWED IN THE FIRST YEAR I .E., A.Y. 2005-06, THE A.O. HAS ALLOWED THE SAME DURING THE A .YS. 2006-07 AND 2007-08 AND HENCE THE PROCEEDINGS UNDER SECTION 263 MAY BE DROPPED. 2.1. THE CIT, HOWEVER, OBSERVED THAT THE SHARING RATIO IN THE ORIGINAL DEVELOPMENT AGREEMENT DATED 01.04.2001 AS WELL AS SUPPLEMENTARY AGREEMENT DATED 19.12.2002 WAS 50:50 AND THE MENTION IN THE SUPPLEMENTARY AGREEMENT OF THE SHARING RATIO IN THE ORIGINAL AGREEMENT BEING 65:35 IS NOT CORRECT AS IN THE ORIGINAL AGREEMENT ITSELF THE SHARING RATIO IS 50:5 0. HE THEREFORE HELD THAT THE SUPPLEMENTARY DEED IS A MAK E BELIEVE DEED TO CLAIM THAT ASSESSEE HAS PROVIDED SO ME FUNDS TO THE DEVELOPER. HE FURTHER OBSERVED THAT EV EN IN THE LEASE DEEDS ENTERED INTO WITH M/S. SECUNDERABAD HOTELS P. LTD., THERE IS NO MENTION OF THE SUPPLEME NTARY DEED. THUS, HE HELD THE SUPPLEMENTARY DEED TO BE A COLOURABLE DEVICE INTRODUCED BY THE ASSESSEE TO CLA IM INTEREST EXPENDITURE FROM THE RENTAL INCOME. HE ACCORDINGLY HELD THAT THE ASSESSMENT ORDER ALLOWING THE CLAIM OF INTEREST UNDER SECTION 24(B) AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND DIRECTED THE A.O. 5 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. TO FURTHER EXAMINE THE ALLOWABILITY OF THE CLAIM OF THE ASSESSEE UNDER SECTION 24(B) OF THE ACT. THE A.O. W HILE GIVING EFFECT TO THE ORDER OF THE CIT UNDER SECTION 143(3) READ WITH SECTION 263 OF THE ACT DISALLOWED THE CLA IM UNDER SECTION 24(B). MEANWHILE, ASSESSEE PREFERRED APPEALS BEFORE ITAT AGAINST THE ORDER UNDER SECTION 263. B BENCH OF THIS TRIBUNAL IN ITA.NO.832 & 833/HYD/ 2011 DATED 26.03.2014 QUASHED THE ORDER UNDER SECTION 26 3 OF THE ACT BY HOLDING IT TO BE UNSUSTAINABLE. THE RELE VANT PARAGRAPH IS REPRODUCED HEREUNDER : 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE PAPER BOOK PLACED ON RECORD. AS SEEN FROM THE FACTS AVAILABLE ON RECORD, ASSESSEE DID BORROW FUNDS TO PAY M/S. SALIVAHANA ASSOCIATES FOR COMPLETION OF THE BUILDING, WHICH WAS LEASED OUT. THEREFORE, THERE IS NO DIVERSION OF FUNDS AS ALLEGE D BY THE LD. CIT. MOREOVER, THERE IS NO OTHER ACTIVIT Y FOR THE ASSESSEE EXCEPT OWNING 50% SHARE OF THE PROPERTY WHICH WAS LEASED OUT. AS STATED BY THE A.O. IN A.Y. 2005-06, ASSESSEES OWN RESOURCES OF INCOME IS RENTAL INCOME AND INTEREST CLAIMED ON BORROWED FUNDS WAS EXAMINED IN A.Y. 2005-06, WHEREIN SUPPLEMENTARY DEED WAS ALSO CONSIDERED THEREBY, A.O. HAS GIVEN A FINDING THAT ASSESSEE OWNS 50% OF THE CONSTRUCTED AREA IN THE BUILDING. NOT ONLY THAT ASSESSEE ALSO OFFERED ON INCOME AT 50% OF THE BUILDING, WHICH WAS LEASED OUT, ALONG WITH M/S. SALIVAHANA ASSOCIATES. THEREFORE, SINCE ASSESSEE IS OWNING THE PROPERTY OF 50% OF THE SHARE OF THE BUILDING AND LEASE RENT WAS ALSO OFFERED ACCORDINGLY ON THE SAME AREA, FINDING BY CIT THAT THE SUPPLEMENTARY AGREEMENT IS NOT A REAL DEED IS NOT BASED ON RECORD. JUST BECAUSE ASSESSEE REFERRED THE ORIGINAL REGISTERED DEED WHILE LEASING OUT THE PROPERTY, IT DOES NOT MEAN THAT SUPPLEMENTARY DEED DOES NOT EXIST. FURTHER FOR COMPLETION OF THE BUILDING, ASSESSEE PAID AN AMOUNT OF RS. 330 LAHS OUT OF WHICH RS. 300 LAKHS WAS STATED TO BE BY WAY OF LOAN FROM UCO BANK 6 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. AND AS SEEN FROM THE RECORD, RS.330 LAKHS PAID BY THE ASSESSEE WAS ALSO OFFERED BY THE SAID SISTER CONCERN AS INCOME. SINCE THESE ASPECTS WERE EXAMINED BY THE A.O. IN A.Y. 2005-06 WHICH WAS THE FIRST YEAR, OF NOT ONLY RENTAL INCOME BUT ALSO CLAIM OF INTEREST ON THE BORROWED FUNDS, THE OBSERVATIONS OF THE CIT CANNOT BE UPHELD. SINCE THE A.O. EXAMINED THIS ISSUE IN THE COURSE OF ASSESSMENT PROCEEDINGS, ALBEIT IN ANOTHER ASSESSMENT YEAR WHILE EXAMINING TWO ASSESSMENT YEARS SIMULTANEOUSLY, ANY OTHER OPINION GIVEN BY THE CIT IS NOT SUSTAINABLE UNDER LAW. 2.2. THEREAFTER, DURING THE A.Y. 2008-09, ON THE BASIS OF THE DISALLOWANCE OF THE CLAIM OF INTEREST IN THE EARLIER YEARS, THE RETURNS OF INCOME PROCESSED UNDE R SECTION 143(1) FOR THE A.YS. 2008-09, 2009-10 AND 2 010- 11 WERE REOPENED BY ISSUANCE OF NOTICE UNDER SECTIO N 148 OF THE ACT TO BRING THE AMOUNT TO TAX. 2.3. FOR THE RELEVANT ASSESSMENT YEARS BEFORE US, THERE WAS NO COMPLIANCE BY THE ASSESSEE TO THE NOTI CES ISSUED UNDER SECTION 148 AND NO INFORMATION WAS FIL ED. THEREFORE, THE ASSESSMENT WAS COMPLETED UNDER SECTI ON 144 READ WITH SECTION 147 OF THE ACT ON THE BASIS O F THE MATERIAL AVAILABLE ON RECORD. THE A.O. THEREAFTER DISALLOWED THE CLAIM OF INTEREST UNDER SECTION 24(B ) ON THE SAME GROUNDS ON WHICH THE CIT SOUGHT TO REVISE THE ASSESSMENTS FOR A.YS. 2006-07 AND 2007-08 UNDER SECTION 263 OF THE ACT. AGGRIEVED, THE ASSESSEE PRE FERRED APPEALS BEFORE THE CIT(A) WHO CONFIRMED THE ORDERS OF THE A.O. FOR A.YS. 2009-10 AND 2010-11 AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 7 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. 3. LD. COUNSEL FOR THE ASSESSEE, MR. S. RAMA RAO, WHILE REITERATING THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW SUBMITTED THA T THE ASSESSEES APPEAL FOR A.Y. 2008-09 WAS STILL PENDIN G BEFORE THE CIT(A). AS REGARDS THE PRESENT APPEALS A ND THE ISSUE THEREIN, HE HAS DRAWN OUR ATTENTION TO THE DEVELOPMENT AGREEMENTS, SUPPLEMENTARY DEED TO THE DEVELOPMENT AGREEMENT AND ALSO LOAN APPLICATIONS OF UCO BANK AND ALSO STATEMENT OF ACCOUNT FOR THE PERIOD 03.03.2005 TO 02.09.2005 IN UCO BANK THE COPIES OF WHICH ARE ALL FILED IN THE PAPER BOOK FILED BEFORE US. HE HAS DRAWN OUR PARTICULAR ATTENTION TO THE PREAMBLE OF THE DEVELOPMENT AGREEMENT WHERE THE SHARING RATIO BETWE EN THE DEVELOPER AND THE OWNER IS MENTIONED AS 65:35 A ND ALSO PARA-5 OF THE AGREEMENT WHERE IT IS MENTIONED THAT THE DEVELOPER IS AT LIBERTY TO SELL THEIR SHARE OF 50% OF THE PREMISES. HE SUBMITTED THAT THE MENTION OF 50% IN P ARA 5 IS A MISTAKE AND THE ACTUAL SHARING RATIO AS AGREED TO WAS 65: 35 ONLY AS IS FURTHER CLARIFIED IN SUPPLEMENTAR Y DEED. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSMENTS UNDER SECTION 143(3) READ WITH SECT ION 263 WERE COMPLETED FOR THE A.YS. 2006-07 AND 2007-0 8 AND THE ASSESSEE HAD CHALLENGED THE ORDER UNDER SEC TION 263 BEFORE THE ITAT AND THE TRIBUNAL IN ITA.NO.832 & 833 OF 2011 DATED 26.03.2014 FOR THE A.YS. 2006-07 AND 2007-08 RESPECTIVELY AFTER ACCEPTING THE EXISTENCE OF THE SUPPLEMENTARY DEED, HAS QUASHED THE PROCEEDINGS UND ER SECTION 263 OF THE I.T. ACT. HE SUBMITTED THAT THE ASSESSMENTS UNDER SECTION 143(1) FOR THE RELEVANT 8 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. ASSESSMENT YEARS BEFORE US I.E., A.YS. 2009-10 AND 2010- 11 WERE REOPENED UNDER SECTION 147 ON THE BASIS OF THE ASSESSMENTS UNDER SECTION 143(3) READ WITH SECTION 263 FOR THE EARLIER A.YS. 2006-07 AND 2007-08 AND SINCE THE BASIS FOR THOSE ORDERS ITSELF WAS KNOCKED OFF BY TH E TRIBUNAL, ACCORDING TO HIM, THE VERY BASIS FOR REOP ENING OF THE ASSESSMENT FOR THE A.Y. 2009-10 I.E., ASSESSMEN T UNDER SECTION 143(3) READ WITH SECTION 263, IS NO L ONGER IN EXISTENCE AND HENCE THESE PROCEEDINGS BEFORE US ALS O ARE LIABLE TO BE QUASHED. A COPY OF THE ORDERS OF THE T RIBUNAL IS PLACED BEFORE US. 4. THE LD. D.R, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT FOR THE EARLIER ASSESSMENT YEARS, THE ASSESSMENTS WERE REVI SED UNDER SECTION 263 WHICH HAS BEEN QUASHED BECAUSE ACCORDING TO THE TRIBUNAL, A.O. FOR A.Y. 2005-06 WA S AWARE OF THE SUPPLEMENTARY DEED BY WHICH THE SHARE OF THE PROPERTY TO THE ASSESSEE WAS INCREASED FROM 35% TO 50% AND HENCE SUCH ASSESSMENT ORDER COULD NOT BE REVISED, WHEREAS THE PROCEEDINGS BEFORE US ARE THE RE- ASSESSMENT PROCEEDINGS WHICH CANNOT BE SAID TO BE S AME AS REVISION PROCEEDINGS UNDER SECTION 263. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ONLY DISPUTE I N THIS APPEAL IS WHETHER THE ASSESSEE HAD BORROWED FUNDS F OR CONSTRUCTION OF THE BUILDING AND IF SO, WHETHER THE ASSESSEE IS ENTITLED TO THE INTEREST ON SUCH BORROW ED 9 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. FUNDS AS DEDUCTION FROM THE RENTAL INCOME. THERE IS NO DISPUTE AS REGARDS THE DATE OF DEVELOPMENT AGREEMEN T BUT THE DISPUTE IS WITH REGARD TO THE SHARING RATIO MEN TIONED IN THE DEVELOPMENT AGREEMENT AND ALSO ABOUT THE EXISTENCE OF THE SUPPLEMENTARY DEED AND WHETHER THE ASSESSEE HAS ADVANCED FUNDS TO THE DEVELOPER FOR TH E PURPOSE OF ACQUISITION OF PROPERTY. TO DISBELIEVE T HE EXISTENCE OF THE SUPPLEMENTARY DEED, THE A.O. AND T HE LD. CIT(A) HAVE RELIED UPON THE LEASE DEEDS ENTERED INT O BY THE ASSESSEE WITH M/S. SECUNDERABAD HOTELS P. LTD., WHEREIN THERE IS NO MENTION OF THE SUPPLEMENTARY DE ED EVEN THOUGH THEY WERE STATED TO BE EXECUTED AFTER T HE EXECUTION OF THE SUPPLEMENTARY AGREEMENT. THEY HAVE OBSERVED THAT THERE IS A MENTION OF ONLY THE ORIGIN AL DEVELOPMENT AGREEMENT DATED 01.04.2001 IN THE REGISTERED LEASE DEEDS. FURTHER, THE A.O. HAS ALSO CONSIDERED THE FACT THAT THE RATIO OF SHARING BETWE EN THE ASSESSEE AND THE DEVELOPER WAS MENTIONED AS 50:50 E VEN IN THE ORIGINAL DEVELOPMENT DEED. AS REGARDS THE ASSESSEES CLAIM OF TAKING LOAN FROM UCO BANK LTD. FOR ACQUISITION OF THE PROPERTY, THE A.O. HAS OBSERVED THAT THE LOAN HAS BEEN TAKEN AFTER THE EXECUTION OF THE LEAS E DEEDS WITH M/S. SECUNDERABAD HOTELS P. LTD., AND THEREFOR E, THE LOAN IS ON THE RENTAL INCOME AND NOT FOR CONSTRUCTI ON OF THE BUILDING. 5.1. THE LD. COUNSEL FOR THE ASSESSEE, IN ORDER TO REBUT THIS FINDING OF THE AUTHORITIES BELOW, HAS DR AWN OUR ATTENTION TO THE DEVELOPMENT AGREEMENT DATED 01.04. 2001 10 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. FILED AT PAGES 29 TO 32 OF THE PAPER BOOK TO DEMONS TRATE THAT ORIGINALLY THE SHARING RATIO WAS 65:35 ONLY. H E HAS ALSO DRAWN OUR ATTENTION TO THE APPLICATION FORM FO R THE SANCTION/RENEWAL/ENHANCEMENT OF THE SANCTION OF CRE DIT LIMITS MADE TO THE MANAGER OF THE UCO BANK DATED 19.01.2005. ON PERUSAL OF THE SAID APPLICATION, WE FIND THAT AT ITEM-8 OF THE APPLICATION, AS REGARDS THE P URPOSE FOR WHICH THE CREDIT LIMITS ARE APPLIED FOR, IT IS MENTIONED AS LOAN UNDER RENT SCHEME AND THE PURPOSE IS MENTIONED AS TO REPAY LOAN OF M/S. SALIVAHANA ASSOCIATES TAKEN FROM ORIENTAL BANK OF COMMERCE, S. D. ROAD BRANCH AND THE AMOUNT MENTIONED IS RS.3 CROR ES. WE ALSO FIND FROM PAGE 78 OF THE PAPER BOOK FILED B Y THE ASSESSEE THAT UCO BANK HAS ADDRESSED A LETTER TO TH E CHIEF MANAGER, ORIENTAL BANK OF COMMERCE, SECUNDERABAD INTIMATING THAT A CHEQUE FOR RS.3,44,00,000 BEARING NO.471770 DATED 03.03.2005 FAVOURING THE ORIENTAL BANK OF COMMERCE FOR THE ACC OUNT OF M/S. SALIVAHANA ASSOCIATES IS ENCLOSED THEREWITH AND REQUESTING THE BANK TO RELEASE THE DOCUMENTS MORTGA GED BY THE LOANEE TO THE BANK SINCE THE ASSESSEE HAS AV AILED CREDIT FACILITIES FROM UCO BANK AGAINST THE SAME PROPERTY. FROM THE DETAILS OF THE PROPERTY, IT IS C LEAR THAT THE VERY SAME BUILDING BHUVANA TOWERS WAS MORTGAG ED WITH THE ORIENTAL BANK OF COMMERCE. THUS, THOUGH TH E ASSESSEE HAS TAKEN THE LOAN FROM UCO BANK AFTER CONSTRUCTION OF THE BUILDING, WE FIND THAT THE SAME HAS BEEN TAKEN TO REPAY THE LOAN TAKEN FROM ORIENTAL BA NK OF COMMERCE BY ITS ASSOCIATE CONCERN SHALIVAHANA 11 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. ASSOCIATES (THE DEVELOPER). THE DETAILS OF THE PURP OSE OF LOAN FROM ORIENTAL BANK OF COMMERCE ARE NOT FILED B EFORE US. THEREFORE, THE EXACT PURPOSE OF THE SAID LOAN I S NOT KNOWN TO US. HOWEVER, THE FACT THAT THE TITLE DEEDS OF BHUVANA TOWERS HAVE BEEN MORTGAGED WITH THE ORIENTA L BANK OF COMMERCE RAISES THE PRESUMPTION THAT THE LO AN MUST HAVE BEEN TAKEN BY THE DEVELOPER IN RELATION T O THE SAID PROPERTY. SINCE THE CONSTRUCTION OF THE PROPER TY WAS COMPLETED IN 2004 AND THE LEASE DEEDS WERE ENTERED INTO ON 01.01.2005, THE CONTENTION OF THE ASSESSEE THAT THE LOAN HAD BEEN OBTAINED BY THE DEVELOPER FOR CONSTRU CTION OF THE BUILDING IS PROBABLE AS NO BANK WOULD PROBAB LY GIVE A LOAN ON A BUILDING WHICH IS NOT YET COMPLETE D FOR ANY OTHER PURPOSE. HOWEVER, THE LOAN FROM ORIENTAL BANK OF COMMERCE WAS TAKEN BY THE DEVELOPER AND THE REAS ON FOR THE ASSESSEE TO REPAY THE SAME IS STATED TO BE FOR THE PURPOSE OF ACQUIRING THE PROPERTY. 6. NOW, LET US EXAMINE IF THE SUPPLEMENTARY DEED IS ACCEPTABLE. WE FIND THAT INITIALLY THE SAID DEED WAS DISBELIEVED BY THE CIT UNDER SECTION 263 WHEREIN, H E HAS REPRODUCED THE PORTION OF BOTH THE DEVELOPMENT AGREEMENT AS WELL AS SUPPLEMENTARY AGREEMENT, WHERE IN THE SHARING RATIO OF PARTIES HAS BEEN MENTIONED AS 50:50. THE A.O., DURING THE RELEVANT ASSESSMENT YEARS BEFO RE US, ALSO HAS REPRODUCED THE SAME PORTION REPRODUCED BY THE CIT IN HIS ORDER UNDER SECTION 263 TO HOLD THAT THE ORIGINAL AGREEMENT ITSELF STIPULATED THE SHARING RA TIO AS 50:50 AND THEREFORE THE SUPPLEMENTARY DEED IS A MAK E 12 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. BELIEVE DOCUMENT. HOWEVER, FROM THE COPY OF THE DEVELOPMENT AGREEMENT FILED BEFORE US, WE FIND THAT THE DEVELOPER HAD AGREED TO COMPLETE THE CONSTRUCTION O F THE BUILDING WITH ITS OWN FUNDS AND THE SHARING RATIO I S MENTIONED AS 65:35. THE REASON FOR CHANGING THE SHA RING RATIO IS MENTIONED IN THE SUPPLEMENTARY DEED AS PRO VIDING OF FUNDS BY THE OWNER TO THE DEVELOPER FOR THE CONSTRUCTION WORK. DURING THE PROCEEDINGS BEFORE TH E CIT UNDER SECTION 263, THE ASSESSEE HAD STATED THAT THE DEVELOPER HAD FAILED TO PAY THE INTEREST FREE NON- REFUNDABLE DEPOSIT OF RS.80,00,000 DUE TO WHICH THE SHARING RATIO HAS BEEN CHANGED. THERE IS NO FINDING ON THIS CONTENTION OF THE ASSESSEE BY ANY OF THE AUTHO RITIES BELOW. DURING THE COURSE OF HEARING BEFORE US ALSO, THE LD. COUNSEL FOR THE ASSESSEE, REITERATED THAT THE A SSESSEE DID NOT RECEIVE THE NON-REFUNDABLE DEPOSIT OF RS.80,00,000. FURTHER, THE REASON FOR ADVANCING THE SUM OF RS.300 LAKHS HAS BEEN MENTIONED AS PAYMENT FOR FINISHING WORKS @ RS.300 PER SQ. FEET FOR LETTING O UT THE CONSTRUCTED AREA. IT IS NOT CLEAR WHETHER ANY AGREE MENT HAS BEEN ENTERED INTO FOR THIS PURPOSE. HOWEVER, SI NCE NO COPY OF ANY SUCH AGREEMENT IS FILED BEFORE US, IT I S PRESUMED THAT THERE IS NO SUCH WRITTEN AGREEMENT. A S SEEN FROM BOTH THE DEVELOPMENT AGREEMENT AS WELL AS THE SUPPLEMENTARY AGREEMENT, PARA-4 OF THE AGREEMENT PROVIDES THAT THE DEVELOPER SHALL COMPLETE THE TOTA L CONSTRUCTION INCLUDING RCC CIVIL WORKS, WHILE PARA- 5 OF THE AGREEMENTS PROVIDE THAT THE DEVELOPER SHALL BEA R ALL COSTS OF ARCHITECTS, ENGINEERS, CIVIL WORKS, FINISH ING AND 13 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. SHALL INDEMNIFY SHALIVAHANA ESTATES AGAINST ANY CLA IMS IN THIS RESPECT. THEREFORE, IT IS NOT CLEAR AS TO WHAT ARE THE FINISHING WORKS FOR WHICH IT WAS AGREED TO PAY RS.3 00 PER SQ. FEET. THE FACT THAT THE LOAN WAS OBTAINED BY TH E ASSESSEE AFTER COMPLETION OF THE CONSTRUCTION ON TH E LEASE RENTALS CANNOT BE THE SOLE REASON TO COME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT INCURRED EXPENDITURE ON THE ACQUISITION OF THE PROPERTY. THE TIME WHEN THE LIABILITY OF THE ASSESSEE HAS ARISEN IS TO BE SEEN. IF THE ASSESSEE HAS AGREED TO PAY THE DEVELOPER FOR THE WORKS OUTSIDE THE DEVELOPMENT AGREEMENT FOR MAKING IT FIT FOR LETTING OUT THE PROPERTY WITH ALL AMENITIES, IT IS THE EXPENDITURE INCURRED BY THE ASSESSEE FOR ACQUISITIO N OR IMPROVEMENT OF THE PROPERTY. THE MODE OR TIME OF PAYMENT WOULD NOT DETERMINE THE NATURE OF THE EXPENDITURE. THEREFORE, ALL THESE FACTS NEED VERIFI CATION BY THE A.O. WHICH HAS NOT BEEN CARRIED OUT BY THE A.O. FOR THE ASSESSMENT YEARS BEFORE US. BUT THE FIRST YEAR OF THE CLAIM IS A.Y. 2005-06 WHEREIN THE CLAIM OF THE ASSE SSEE WAS ALLOWED IN THE ASSESSMENT PROCEEDINGS UNDER SEC TION 143(3) OF THE ACT AND THIS FACT HAS BEEN TAKEN NOTE OF BY THE COORDINATE BENCH OF THIS TRIBUNAL WHILE QUASHIN G THE REVISION ORDER UNDER SECTION 263 OF THE ACT. AS RIG HTLY HELD BY THE CIT(A), THE OBSERVATIONS OF ITAT IN THE 263 PROCEEDINGS MAY NOT BE ENTIRELY RELEVANT FOR THE PROCEEDINGS UNDER SECTION 144 READ WITH SECTION 147 OF THE ACT BUT AS SEEN FROM THE COPY OF THE ASSESSEES SUBMISSIONS BEFORE THE A.O. FOR THE A.Y. 2005-06, W E FIND THAT THE ASSESSEE HAD SUBMITTED THAT IT HAD REQUEST ED THE 14 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. BUILDER TO COMPLETE THEIR SHARE OF CONSTRUCTED AREA FOR WHICH THE ASSESSEE SHALL REIMBURSE THE EXPENSES INC URRED FOR PROVIDING ALL THE AMENITIES AND THAT THE AVAILI NG OF THE LOAN WAS TO REIMBURSE THE DEVELOPER FOR SUCH FINISH ING WORKS. SINCE THE ASSESSMENT FOR A.Y. 2005-06 WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AFTER CAL LING FOR VARIOUS DETAILS AND SCRUTINY OF THE SAME, IT IS TO BE PRESUMED THAT THE A.O. HAS VERIFIED THE DETAILS AND ACCEPTED THE ASSESSEES CONTENTIONS AFTER BEING SAT ISFIED ABOUT THEIR ACCEPTABILITY. 7. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RADHASWAMI SATSANG VS. CIT REPORTED IN 193 ITR 321, THAT THOUGH, STRICTLY SPEAKING, RES JUDICATA IS NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS AS EAC H ASSESSMENT YEAR IS A UNIT AND WHAT WAS DECIDED IN O NE YEAR MIGHT NOT APPLY IN THE FOLLOWING YEAR, WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT IN ONE WA Y OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NO T BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. THE FULL BENCH OF HONBLE DELHI HI GH COURT IN THE CASE OF USHA INTERNATIONAL REPORTED IN (2012) 348 ITR 485 HAS OBSERVED THAT WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SUB-SECTION (3 ) OF SECTION 143, A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND AND TH AT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT I N TERMS 15 ITA.NO.1868 & 1869/HYD/2014 SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABA D. OF CLAUSES (E) OF SECTION 114 OF THE INDIAN EVIDENC E ACT, THE JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. THUS, THERE HAS TO BE CONSISTENCY AND UNIFORMITY IN THE APPROACH OF THE REVENUE IN THE ASSESSEES OWN CASE IN THE SUBSEQUENT ASSESSMENT YE ARS ON THE SAME SET OF FACTS. SINCE THE A.O. HAS ACCEPT ED THE ASSESSEES CLAIM AFTER VERIFICATION AND THE REVENUE HAS NOT TAKEN ANY STEPS TO REVISE OR REOPEN THE ASSESSMENT FOR A.Y. 2005-06, THE ASSESSEE CANNOT BE ASKED TO PROVE THE SAME SET OF FACTS FROM YEAR TO YEAR. THEREFORE, WE ARE OF THE OPINION THAT THE DISALLOWANCE OF THE CLAIM OF I NTEREST ON THE LOAN BORROWED BY THE ASSESSEE FROM UCO BANK UNDER SECTION 24(B) OF THE ACT IS NOT SUSTAINABLE. THE ASSESSEES APPEALS ARE ACCORDINGLY ALLOWED. 8. IN THE RESULT, ASSESSEES APPEALS FOR BOTH THE A.YS. 2009-10 AND 2010-11 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.11.2015. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 27 TH NOVEMBER, 2015 VBP/- COPY TO : 1. SHALIVAHANA ESTATES P. LTD., (FORMERLY KNOWN AS SHALIVAHANA ESTATES) SECUNDERABAD. C/O. MR. S. RAMA RAO, ADVOCA TE, FLAT NO.102, SHRIYAS ELEGANCE, 3-6-643, STREET NO.9, HI MAYATNAGAR, HYDERABAD 500 029. 2. THE ACIT, CIRCLE 10(1), I.T. TOWERS, A.C. GUARDS , HYDERABAD. 3. CIT(A)-VI, HYDERABAD 4. CIT-V, HYDERABAD 5. D.R. ITAT B BENCH, HYDERABAD. 6 . GUARD FILE